Taxation of cryptos in Andorra (sale and holding) in 2023.
Applications based on blockchain and cryptocurrency technology in Andorra increased dramatically in 2019.
And this will not be accidental. It happened because as of 2019, both banks in Andorra and in the rest of the world realized that cryptocurrencies in Andorra and cryptocurrencies in general, are digital assets that are not always linked to money laundering or else to some illicit activity.
Cryptocurrencies in Andorra and anywhere in the world can be traced back to the origin of the funds.
Therefore, many cryptocurrency investors, seeing that Andorra became a country where digital assets were welcome, became interested in applying for residency in Andorra.
These cryptoinvestors, as we will detail, are facing advantages, benefits on taxation and problems in the day to day, but the truth is that currently thousands of professionals in the cryptocurrency sector, live in Andorra and develop their projects from this small country.
Are cryptocurrencies subject to Exit Tax?
Exit taxes apply mainly to Spanish national residents who wish to relocate taxable property to countries outside the European Community. The taxes mainly affect the largest amount of assets.
Companies worth more than 1,000,000 Euros or portfolios of portfolios worth more than 4,000,000 Euros may pay a tax.
Is there any way to avoid paying the exit tax if I have much more cryptoassets? Talk to us.
Spain is usually one of the countries of the European Union that in the framework of the exercise of its functions, usually puts a lot of pressure on entrepreneurs, especially those who are subject to the payment of the famous exit tax in Spain. That is why if you are considering moving from Spain, the exit tax is something you should take into account.
The regulatory framework for cryptocurrency-related activities in Andorra.
Andorra for a while was exposed to all kinds of activities of professionals who settled in the country and brought their crypto-based funds to the country.
Now, these crypto-investors, took advantage of a time when there was a legal loophole regarding cryptocurrencies in Andorra.
In this article you can read everything related to the position that Andorra has taken in relation to cryptocurrencies. Although Andorra has tried to consolidate the position of the European economic space, it has not been as lax as countries like Malta or Dubai.
Bitcoin is used in suspicious or outright transactions for money laundering purposes. To date this has been the assertion of many people in relation to cryptocurrencies, but similarly it is done with traditional money.
Andorra has an extremely sensitive view of these issues and has the greatest vulnerability as one of the smallest countries in the ECB’s independent financial system.
In an eagerness to regulate cryptocurrencies, Andorra quickly made a draft law, which was later approved by the Consell General, related to digital assets in Andorra. In this article, we explain Andorra’s position on cryptocurrencies in the country.
Reasons to buy cryptocurrencies in Andorra
Andorra has become an important center of innovation. It is becoming an important technological and financial destination for investors.
Andorran authorities have worked on regulating the Cryptoactive Industries to sustain its growth. The underlying technology is cryptoactive.
Now, in addition to being able to enjoy political and economic stability in the country, if you invest in cryptocurrencies in Andorra, you can enjoy the benefits of residency in Andorra.
The tax residency in Andorra, allows you to obtain the tax benefits of the country, that is to say that you will pay 10% for your profits obtained around the world. Andorra is a country where you are not asked to declare the assets you have abroad, but you must pay for the income obtained around the world.
Thus, taxation in Andorra is relatively low and therefore attractive to proceed with the purchase of cryptocurrencies in Andorra. Thus, trading from Andorra pays off in terms of the taxation applied to your earnings.
Therefore, Andorra’s fiscal framework is very attractive and there is no exit tax in Andorra, thanks to the fact that the Government understands that the number of residents in Andorra matters as they help the rate of improvement in the quality of life of the country. Thanks to these regulations, there are not many investors who want to return to their country of residence and leave Andorra and its tax benefits.
However, everything is possible. However, in another article we also talked about the fact that Andorra is a country that has become a hub for investors and entrepreneurs.
The advantages of cryptocurrency trading or cryptocurrency mining in Andorra
Andorra is clearly very attractive for blockchain technology and cryptocurrency projects with entrepreneurs and professionals living here. It can be done by setting up technology companies in various areas. If you want to create a company in Andorra, please contact us so we can help you develop your projects.
In addition, security, environment, social issues and taxation make Andorra an ideal place for cryptocurrency trading.
You will find information about tax advantages in Andorra in this article. But cryptocurrency investment is a topic that is not considered traditional in Andorra.
Therefore, mining cryptocurrencies in Andorra, is totally legal and in fact the billing for electricity is one of the lowest in the entire European economic space. Here you have all the information about mining in Andorra.
How to account for capital gains from the sale of cryptocurrencies?
In Andorra in comparison with other countries it is not necessary to calculate cryptocurrency gains using FIFO, which may negatively affect early investors.
The LIFO method can be replaced by a legal method. This allows people to determine portfolio income from cryptocurrency purchases before large increases, namely Bitcoin, significantly reducing taxes.
We will spare technical details on other specific cases ( BiTC forks, Ethereum, mining and stacking, NFT, DFT, crypto betting and crypto references).
In this binding consultation that the Andorran Tax Agency resolved in 2018, it made clear the method for accounting and therefore the taxation to which gains obtained as a result of the purchase and sale of cryptocurrencies in Andorra are exposed.
Registration of cryptocurrency transactions for traders
In this regard, it would be useful to keep on hand a detailed report of transactions made by bitcoin, this information is necessary to certify the amount of money to be settled in order to return it to the financial system in current currencies.
When it comes to keeping up to date accounting by specialized crypto accountants, it is much easier for them, since in this way each cryptocurrency operation in Andorra, the holding of cryptocurrencies and the profits that have been obtained through certain trading operations are kept in detail.
Cryptocurrencies and the Spanish Treasury
According to the European Commission, the creation of the Bitcoin database will collect and analyze user data.
Spanish authorities are currently conducting an audit of the potential threats of cryptocurrencies to consumers in order to protect them.
Cryptocurrencies are worth the time to consider and pay taxes in the first half of the tax year despite the fact that a cryptocurrency’s profits cannot exceed the amount of its value in the first half of the tax year.
Now, there are many who have received some messages or emails in Spain about the need or else the reminder of the need for taxation of all new capital obtained through gains in cryptocurrencies.
This scared at the time many people who had made an investment in Spain in cryptocurrency funds or at that time had cryptocurrency holdings or had traded at some point.
This situation, caused by the exchange of information between banks in Spain and the Spanish Tax Agency, scared away many people who wanted to invest in bitcoin or in some other cryptocurrencies.
In this article we explain the situation well.
Does Andorra have a cryptocurrency law?
As mentioned above at the end of 2021, the Andorran governments submitted a draft law to regulate and greatly facilitate cryptocurrency-related businesses and their relations with banks and institutions. In our opinion, two interesting aspects have been included in the bill: it is an absolute exchange and Andorrans would be able to sell cryptocurrency without taxes.
In this other article you have a complete guide about cryptocurrencies in Andorra and their taxation.
Andorra has followed the regulation of some European Union countries and through regulation and the creation of a new law, allows the use and trading of cryptocurrencies and digital assets in Andorra, but in case of starting business related to cryptocurrencies in Andorra (that not the simple purchase or holding of cryptoassets) you must go through prior and mandatory authorization through the Andorran Financial Authority (AFA).
The transfer of the issue of cryptoassets in Andorra to the AFA, has caused that currently many projects have been stopped not by the Government of Andorra, but rather by this prior authorization of the AFA due to the need for documents and information about the traders and about the platform of use, the cryptoassets involved, etc. to be used in that particular project.
This has caused many cryptoasset-based projects to move to other countries with a more lax law on cryptocurrencies and blockchain technology, such as Dubai.
However, it is common that many people who have companies based on cryptoassets in Dubai or Malta, do not have residency in those countries but have residency in Andorra. Having the residence in Andorra allows to have a very lax taxation in the country (10%) and to have an income tax return in Andorra.
Through the payment of the income tax in Andorra, investors are assured that their investment has been duly taxed in an approved country and that there is documentation of this taxation (of their profits).
Do Andorran banks accept cryptocurrencies?
At first, Andorran banks resisted the use of cryptocurrencies.
Some are adding staff specialized in blockchain and accepting cryptocurrency as a payment method.
On the other hand, it seems that the market is starting to value cryptocurrency and other crypto currencies.
The most important thing is to select the best bank according to our needs so that we can perform the tasks.
On numerous occasions, bank employees turned away misinformed users who had not properly documented traceable funds.
What is the position of the Andorran banking system in relation to cryptocurrencies and blockchain?
Andorran banking is vulnerable to cryptocurrencies, exposing it to extreme amounts of risk.
Given that the finances of small countries are potentially vulnerable to potential risks such as money laundering issues, he is relentlessly pursuing an anti-money laundering strategy.
However, any capital that comes from a platform that is accepted by the banking institutions in Andorra does not pose any kind of problem.
This type of platform already accepted by the bank, helps a lot in practice to be able to receive your cryptocurrencies in a bank account in Andorra.
However, whether through the purchase of Bitcoin or through any other cryptocurrency, this capital must be traceable and justified in order to be withdrawn in a secure area.
Crypto platforms used
Binance has become one of the most prestigious exchanges in the Andorran region, but Coinbase remains a well-established company.
Banks also take Kraken.
The general rule of thumb is to make sure that the account is registered and able to access and trade from an independent and trusted source.
Overall, it would be a trusted system that would make Andorran banks feel secure and understand that there has never been money theft with them.
How to become a resident in Andorra being a cryptocurrency investor and trader?
Residency is different for different reasons. In terms of profile, we can advise passive or non-profit residency as a patrimonial profile or an active residency for profiles that have business activity.
If you invest in cryptos either bitcoin or any other cryptocurrency you will need to take into account whether you do it as part of a blockchain technology based project that requires a license by the Government in Andorra or whether you do it in the framework of managing your own crypto-based wealth.
Please contact us so that we can advise you on which residency best suits your personal and professional situation.
In this way you will be able to pay the tax corresponding to your profits (either through income tax or corporate tax). Your capital can be taxed in Andorra and thus have your profits in a safe zone.
Mining and blockchain business in Andorra.
Other cryptocurrency-related activities have also arrived in Andorra, such as crypto mining and other blockchain-related business activities.
In this type of housing, the typical self-residential type is created by doing the business to conduct the business. The company’s taxes on profits are 10%.
This percentage does not affect the activities carried out by cryptocurrencies, but deducted all costs associated with the activity.
Contact us
If you are currently living in Spain or in a country other than Spain (such as the United Kingdom) and you are looking for an exit from the European Union or a safe and quiet area where you can pay your taxes, Andorra can be your area and solution.
Thanks to the fiscal measures imposed by the government, all capital coming from Spain or any other country, once passed the foreign investment process, will be able to settle in Andorra without any problem, a safe area thanks to the political and economic stability of the country.
One of the important points of cryptos is that they can be traced.
If this article has been of interest to you and you have any doubts about the price of the procedures or about the price of the fees applied in the country, do not hesitate to contact us.